CHICAGO (Reuters) - Within the past two weeks, speculative investors have bought back close to 1 billion bushels worth of corn in the form of Chicago Board of Trade futures and options contracts – which was very probable given the record bearish bets extending into the U.S. growing season.
The potential of the 2017 U.S. corn crop has come into question with less-than-ideal condition ratings and marginal weather forecasts, and no one wants to be last out the door in case corn yields go bust.
Money managers slashed their net corn short in the week ended June 13 to just 17,929 futures and options contracts, representing a dump of 120,829 on the week (reut.rs/2saSk3g).
Last week also marked the second-ever biggest round of short-covering in the corn market. Funds bought back 109,295 short positions, slightly missing the June 30, 2015 record of 119,265 contracts.
Funds had also considerably cut their net short position in the week ended June 6 - though not to the extent of last week - but that move was just as much the result of new longs in the market as it was short-covering. Through June 13, funds only extended their outright longs by 5 percent while slashing their shorts by 29 percent.
Although the data from the Commodity Futures Trading Commission shows that money managers are still net short the yellow grain through June 13, they are presumably long heading into the week of June 19. Corn futures rallied again late last week, which had funds buying up even more contracts.
It is likely that speculators are also much less bearish on Chicago wheat in real-time than what is reflected in the latest Commitment of Traders report based on last week’s futures rally. Still, pessimism proved lighter in the week ended June 13.
Hedge funds cut their Chicago wheat net short to 82,859 futures and options contracts, which represents the least bearish view on soft red winter wheat since early March. This compares with 106,136 contracts in the week before, and the new stance is only half has large as the recent max short of 162,327 contracts in the week ended April 25 (reut.rs/2sClTwa).
The K.C. wheat bulls were out in force last week as funds extended their net long to 23,888 futures and options contracts. The move from last week’s 2,394-contract long marks the largest-ever weekly extension in either direction on the hard red winter wheat spec stance (reut.rs/2rFrywg).
U.S. hard red spring wheat conditions were slashed to just 45 percent of the crop in good to excellent condition as of June 11 and the wheat market is now garnering evidence that the crop is not going to be great. But funds modestly extended their net long to 11,780 futures and options contracts from 9,486 the week before (reut.rs/2rFwYaG).
This is not even the most bullish that speculators have been this year on Minneapolis wheat, as the net long position exceeded 12,000 contracts for six straight weeks from Jan. 11 through Feb. 21, which topped out at 16,717 contracts in the week ended Jan. 24.
Funds bought back positions across the CBOT soy complex in the week ended June 13, lifting the combined bets off of the previous week’s all-time bearish stance (reut.rs/2saVdkD).
Short-covering was the theme in oilseeds as soybean futures rose from June 6 through the end of the week over U.S. crop weather concerns, though to a lesser degree percentage-wise than the grains. Funds cut their net soybean short to 79,673 futures and options contracts from 94,737 in the prior week, which had been their second all-time bearish view on the oilseed.
Money managers were also covering shorts in soybean oil, chopping their short position to just 16,840 futures and options contracts from 34,301 in the week prior. Soybean meal bets moved the least last week as funds reduced their net short to 44,746 contracts from the previous week’s 50,941 contracts, which was an all-time spec short.
Since June 13, trade sources indicate that commodity funds had been net buyers of both soybeans and soybean oil, but net sellers of soybean meal.
(The opinions expressed here are those of the author, a market analyst for Reuters.)
Editing by Lisa Shumaker